A6 Earnings per share

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A6 – Earnings per share

This note shows how we calculate earnings per share, based both on the present shares in issue (the basic earnings per share) and the potential future shares in issue, including conversion of share options granted to employees (the diluted earnings per share). We have also shown the same calculations based on our operating profit as we believe this gives a better indication of operating performance.

(a) Basic earnings per share

(i) The profit/(loss) attributable to ordinary shareholders is:

			2009
	Operating profit £m	Adjusting items £m	Total £m
Profit/(loss) before tax attributable to shareholders’ profits	2,022	(217)	1,805
Tax attributable to shareholders’ (loss)/profits	(547)	57	(490)
Profit/(loss) for the year	1,475	(160)	1,315
Amount attributable to minority interests	(193)	(37)	(230)
Cumulative preference dividends for the year	(17)	—	(17)
Coupon payments in respect of direct capital instruments (DCI) (net of tax)	(44)	—	(44)
Profit/(loss) attributable to ordinary shareholders	1,221	(197)	1,024

			2008
	Operating profit £m	Adjusting items £m	Total £m
Profit/(loss) before tax attributable to shareholders’ profits	2,297	(3,597)	(1,300)
Tax attributable to shareholders’ (loss)/profits	(487)	902	415
Profit/(loss) for the year	1,810	(2,695)	(885)
Amount attributable to minority interests	(91)	61	(30)
Cumulative preference dividends for the year	(17)	—	(17)
Coupon payments in respect of direct capital instruments (DCI) (net of tax)	(40)	—	(40)
Profit/(loss) attributable to ordinary shareholders	1,662	(2,634)	(972)

(ii) Basic earnings per share is calculated as follows:

			2009
	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p
Operating profit attributable to ordinary shareholders	2,022	1,221	45.1
Non-operating items:
Investment return variances and economic assumption changes on long-term business	(75)	(120)	(4.4)
Short-term fluctuation in return on investments backing non-long-term business	95	158	5.8
Economic assumption changes on general insurance and health business	57	41	1.5
Impairment of goodwill and other amounts expensed	(62)	(62)	(2.3)
Amortisation and net impairment of intangibles	(144)	(38)	(1.4)
Profit on the disposal of subsidiaries and associates	153	153	5.7
Integration and restructuring costs and exceptional items	(241)	(329)	(12.2)
Profit attributable to ordinary shareholders	1,805	1,024	37.8

			2008
	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p
Operating profit attributable to ordinary shareholders	2,297	1,662	62.9
Non-operating items:
Investment return variances and economic assumption changes on long-term business	(1,631)	(1,280)	(48.4)
Short-term fluctuation in return on investments backing non-long-term business	(819)	(553)	(20.9)
Economic assumption changes on general insurance and health business	(94)	(67)	(2.5)
Impairment of goodwill and other amounts expensed	(66)	(66)	(2.5)
Amortisation and net impairment of intangibles	(117)	(89)	(3.4)
Profit on the disposal of subsidiaries and associates	7	7	0.3
Integration and restructuring costs and exceptional items	(877)	(586)	(22.3)
Loss attributable to ordinary shareholders	(1,300)	(972)	(36.8)

(iii) The calculation of basic earnings per share uses a weighted average of 2,705 million (2008: 2,643 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 31 December 2009 was 2,767 million (2008: 2,658 million).

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